If you are a veteran or active-duty military member looking to buy a home in Tennessee using a VA loan, you should be aware of some upcoming changes to the VA Funding Fee. Starting for VA loans closing in April 2023, the VA funding fee will decrease for veterans. In this article, we will explain what the VA funding fee is, how the changes will affect VA loans in Tennessee, and what you can do to prepare.
The VA funding fee is a one-time fee that is paid by veterans who use a VA loan whenever they purchase or refinance a home. The fee is used to help offset the cost of the VA loan program, which is designed to provide home financing options to veterans and active-duty military members.
The VA funding fee is a percentage of the loan amount and can be paid upfront at closing or rolled into the loan amount. The significant majority of the time, the VA funding fee is automatically rolled into the loan amount and not paid out of pocket. The amount of the fee varies based on factors such as the veteran’s down payment amount, the type of loan, and whether the veteran has used a VA loan before.
For VA loans closing April 7, 2023 and on, the VA funding fee will be reducing. The fee will decrease for almost all uses of the VA loan by .15%. In some cases, where the VA funding fee is at its highest, you will see a .3% reduction in the funding fee. The VA funding fee is the highest if you are doing a VA cash out loan OR if you are buying a home, putting less than 5% down, and it is not your first time using the VA loan. Typically in those situations the VA funding fee would have been 3.6%, but will now be 3.3%.
For example, a first-time homebuyer in Tennessee who uses a VA loan to buy a home with no down payment will see their funding fee decrease from 2.3% to 2.15% of the loan amount. A borrower who has used the VA loan before and buys a new home with no down payment will see their funding fee decrease from 3.6% to 3.3%.
It’s important to note that if you have a 10% or greater service connected disability then you will be exempt from the VA funding fee entirely.
Since this is a positive change, there’s really nothing you need to do ahead of time to prepare for this. The biggest worry is if you are currently in process with a VA loan and have not closed yet. If you fall in this category and your loan is set to close prior to these changes taking effect, it may be worth while seeing if you would be able to extend your closing to benefit from the lower funding fee.
The changes to the VA funding fee that will take effect April 2023 will have a positive impact on most veteran borrowers in Tennessee who use VA loans to purchase or refinance a home. Below is a full chart of the new VA funding fee in all scenarios.
If you are a veteran yourself reading this, thank you for raising your hand to enlist and for the sacrifices you’ve made for our country. We’ll forever be grateful and hope that we can give back to you when you buy a home or refinance.